L-Day 2022 - Key Points

Wednesday 20 July 2022 was L-Day (legislation day) when the Government published draft clauses from the next Finance Bill, giving stakeholders a chance to comment and perhaps influence the final legislation, ahead of the publication of the final Bill shortly after the Budget in the autumn. The Government also used the day to publish responses to some consultations, and to launch new ones. 

Below are the key points from this year's L-Day. We are updating this page, including with CIOT and LITRG comments on measures, where we have them, throughout Wednesday and Thursday.

A ministerial statement has been published here while a range of documents have been published here. This note draws heavily on the ministerial statement as we have not had a chance to summarise the documents ourselves. Generally we include the substance of what is proposed while leaving out - for reasons of brevity - the Government's explanation of its purpose.

Draft legislation 

Previously announced

R&D tax relief: This will amend the definition of qualifying expenditure to include data and cloud costs, refocus the reliefs towards R&D in the UK and implement measures to improve compliance. It will also limit overseas spending on subcontracted R&D and externally provided workers, with some limited exceptions.
^{See press release from the Association of Taxation Technicians: 'R&D plans could catch out smaller companies'}

OECD Pillar 2 reforms: This is the OECD proposal to ensure that multinational enterprises pay a minimum 15% rate of tax in each jurisdiction that they operate in. The Government is publishing draft legislation and a summary of responses to its consultation.
^{CIOT reaction: “The global agreement on a minimum rate of corporation tax is historic but making it happen is complicated... For this reason we welcome the Government’s decision to implement the reform at the end of 2023 rather than, as previously suggested, next April. We also welcome the publication of the draft legislation for consultation at this stage, notwithstanding the recognition that there are many areas that require further multilateral work through the OECD ‘Implementation Framework’. This affords an opportunity for early scrutiny."
Full press release here}

Pensions (net pay): Draft legislation which will provide the basis for HMRC to make top-up payments directly to low-earning individuals saving in pension schemes using a net pay arrangement from 2024-25 onwards. These top-ups will help to better align outcomes with equivalent savers saving into pension schemes using Relief at Source.
^{LITRG reaction: "This is another step closer to resolving a significant pension injustice affecting more than a million low-income workers... [however] it remains unfortunate that HMRC will only be implementing payments to those affected from 2025/26 – backdated by one year to 2024/25. Given that this issue has been known about for many years, and the numbers affected have been steadily increasing, we would have liked to have seen further backdating to at least the 2021/22 tax year when the proposed solution was announced."  
Full press release here}

Air Passenger Duty: APD reforms announced at Autumn Budget 2021. These aim to bolster UK air connectivity through a 50% cut in domestic APD and further align the tax with UK environmental objectives by adding a new ultra-long-haul distance band.

Homes for Ukraine Sponsorship Scheme: New and temporary reliefs from the Annual Tax on Enveloped Dwellings (ATED) and 15% rate of Stamp Duty Land Tax (SDLT) where a corporate entity makes a dwelling available to Ukrainian refugees under the scheme.

Insurance Premium Tax (IPT): Improve the administration of IPT, providing HMRC with powers to make a statutory instrument to move Insurance Premium Tax forms from secondary legislation into a public notice.

Collective money purchase pension scheme: Clarifying legislation to ensure that certain payments made instead of a pension from a collective money purchase pension scheme in the process of winding up do not attract pensions tax charges. 

Relief on disposals of joint interests in land: Changes legislation for Capital Gains Tax roll-over relief and private residence relief to ensure that Limited Liability Partnerships and Scottish partnerships which hold title to land are included.

Transfer pricing documentation: Makes it a requirement for large multinational businesses operating in the UK to keep and retain transfer pricing documentation in a prescribed and standardised format, set out in the OECD's Transfer Pricing Guidelines.

Tax conditionality: Will make licence renewal applications in Scotland and Northern Ireland for taxi and scrap metal licences conditional on completing a tax check with HMRC to ensure the applicant is appropriately registered for tax. (Already in place for licences issued in England and Wales.)

Aggregates Levy: Makes changes to Aggregates Levy exemptions, by replacing four exemptions for by-product aggregate arising from specific types of construction with one broader, more general exemption. It will also restrict an exemption so that aggregate extracted on a construction site specifically for construction use is taxed in the same way as other construction aggregate.

Not previously announced

Soft Drinks Industry Levy (SDIL): Closes a minor loophole and will ensure that all soft drinks meeting the SDIL sugar content condition that are dispensed from fountain machines are within the scope of the levy.

Dormant Assets Scheme: The scheme is being expanded to include eligible assets from the pensions, insurance, investment and wealth management, and securities sectors. This draft legislation aims to ensure that payments from an authorised reclaim fund are treated for the purposes of income tax as if they were from the pension asset that was initially transferred. It also ensures that where an asset has been transferred to an authorised reclaim fund and its owner was alive at the time of transfer but subsequently dies before the asset has been reclaimed, the owner will be treated for Inheritance Tax purposes as still owning the original asset.

Lump Sum Exit Scheme (LSES): Provides clarity that LSES payments will be treated as capital in nature and will be subject to capital gains tax, or corporation tax in the case of incorporated entities.

Chargeable gains: Provides that the transfer of assets between spouses and civil partners that are separating are made on a no gain/no loss for up to three full tax years after the parties cease to live together. (OTS recommendation)
^{See press release from the Association of Taxation Technicians: 'ATT welcomes easing of tax rules for divorcing couples'}

Qualifying Asset Holding Companies (QAHCs): Changes will ensure that the QAHC regime is available to a broader range of investment structures, consistent with the original policy rationale and subject to safeguards. The existing anti-fragmentation rule in paragraph 4 of Schedule 2, Finance Act 2022 will be extended with effect from today.

Aerodrome approval: Establishes an approval regime for aerodromes that handle international flights, and which are not customs and excise designated airports, to strengthen both aerodrome operator accountability and border control provisions.

Time limit for claims: Legislation will be introduced with immediate effect from today to restrict certain claims for double taxation relief. No extended time limit claims will be allowed in relation to amounts calculated by reference to the foreign nominal rate of tax, unless the relevant accounting period is under enquiry, or there has been an actual adjustment of UK or foreign tax within the last six years. This change will only affect certain double taxation relief claims in relation to distributions received by UK companies in previous years and will protect tax revenue in respect of such distributions.

New consultations  

Business Rates: Business Rates: Connecting business rates and tax data proposes options to join up existing tax data with business rates data held across government (deadline 30 Sep)

Data collection: Improving the data HMRC collects sets out options for improving the range of data HMRC collects to provide better outcomes for businesses and taxpayers (deadline 12 Oct)  

Consultation responses

OECD BEPS: UK implementation of Pillar 2 considered the implementation of one aspect of the agreement to reform the international tax framework in response to the challenges of digitalisation (accompanied by draft legislation)
^{See above for CIOT comment}

Self-assessment registration: Income Tax Self Assessment (ITSA): registration for the self-employed and landlords asked whether bringing forward the point at which taxpayers identify themselves to HMRC would help achieve these goals
^{CIOT reaction: “We are pleased that the government agrees there is currently no need for HMRC to inflict what would represent significant upheaval on the newly self-employed and first time landlords with changes to when they have to register to pay income tax... It is right that HMRC should focus on improving its public education work and their own online guidance. As a starting point, HMRC may wish to undertake research amongst those businesses who have recently registered for ITSA, to identify what triggered their registration."
Full press release here
See also press release from the Association of Taxation Technicians: 'ATT calls for improvements to self-assessment registration'}

Offshore tax: Helping taxpayers get offshore tax right invited views on how HMRC can help taxpayers get their offshore tax right

International tax debt: Preventing and collecting international tax debt sought views on how HMRC can better prevent and collect international UK tax debt

Accounting for insurance contracts: IRS17 Accounting changes for insurance contracts asked for feedback on the design of tax regulations which will apply to accounting periods beginning from 2023 to deal with a change in the way insurance contracts are accounted for (accompanied by draft legislation)

What's not there

Alcohol duty reform: The ministerial statement states that the Government is still considering the feedback received to this consultation and will respond in the Autumn.

Online sales tax: This consultation closed on 20 May but the Government has not so far responded. Presumably it is being left to a new administration to decide on this high profile topic.